Korea Starts On-Site Inspections of Bitcoin Exchanges

South Korea’s Ministry of Science and ICT and Korea Communications Commission reportedly announced that they will conduct on-site inspections of cryptocurrency service providers including bitcoin exchanges. They will focus on the cybersecurity of these providers and their compliance with privacy laws.

On-Site Inspections

The Korea Communications Commission and the Ministry of Science and ICT announced on Tuesday that they will cooperate to conduct on-site inspections of bitcoin exchanges, according to local publications. Zdnet Korea elaborated:

The Korea Communications Commission (KCC) plans to conduct on-the-spot checks on the implementation of technical and administrative safeguards for personal information pursuant to the Act on the Promotion of Information and Communication Network Utilization and Information Protection, and to strictly rectify any violations.

In addition, “the KCC will provide information security consulting and technical support to service providers who handle digital currencies online, and will guide them to reduce their own security vulnerabilities,” the news outlet clarified.

“This check is due to the increase in user damages due to subsequent hacking accidents involving virtual wallet hacking and personal information leakage,” The Korea Herald wrote. “The government plans to prevent the occurrence of similar damages and to provide an environment for safe service utilization through inspection of companies handling virtual currencies.”

In July, the country’s largest bitcoin exchange, Bithumb, was hacked and the personal information of over 30,000 customers was leaked. In addition, US cybersecurity firm Fireeye revealed earlier this month that a cyber-espionage group called “Temp.Hermit” launched cyber attacks against Korean bitcoin exchanges between May and July.

Efforts to Regulate Cryptocurrencies

As the Korean bitcoin ecosystem grows, the government has been discussing whether to regulate the digital currency. A task force was set up in July to evaluate the need for regulations.

In August, lawmaker Park Yong-jin submitted a proposed amendment to the Electronic Financial Transactions Act to provide a regulatory framework for bitcoin and other digital currencies. Early this month, news.Bitcoin.com reported on Korea’s top financial regulators jointly announcing their plans to deal with digital currencies by requiring banks to perform due diligence and bitcoin exchanges to intensify their user verification procedures. Meanwhile, small-sum bitcoin remittances were legalized back in July as part of the amended Foreign Exchange Transaction law.

The government’s efforts came amid rising bitcoin trading volumes in the country. Bithumb consistently has the highest trading volume of all exchanges globally, according to Coinmarketcap. On August 21, the exchange announced that its daily trading volume reached 2.6 trillion won, approximately US$2.28 billion, which was larger than the trading volume of the Kosdaq market on the previous day.

What do you think of the Korean authorities conducting on-site inspections and offering cybersecurity support to bitcoin exchanges? Let us know in the comments section below.